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I develop in a Windows environment currently. I currently use S3 as a storage solution so I am somewhat familiar with Amazon's web service offerings. EC2 seems really compelling but I am still not really sure how it all works (how the MySQL database can be stored in S3, how databases can be replicated across instances so that there is data consistency etc).

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MySQL will have to be run on the instance itself, not on S3. Just pretend it's a normal computer, except that you have to have a plan for backups from the very beginning. I recommend the book "High Performance MySQL" from O'Reilly. It's helped me out a lot witih how to manage MySQL. Has chapters on backups/replication/high availability.

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